Banned foreign directors disqualified in Australia

New legislation that will ensure individuals who are disqualified from managing companies in foreign countries will also be automatically disqualified in Australia has been introduced into Parliament by the Minister for Superannuation and Corporate Law, Nick Sherry.

The Corporations Amendment (No 1) Bill 2008, will in the first instance operate only in relation to banned company directors from New Zealand, although other jurisdictions may be added in the future.

Sherry said: “The Government is keen to reinforce and enhance the integrity of Australia’s companies and our financial markets.

“There is a gap in the existing law where individuals can avoid disqualification by moving to Australia.”

Sherry said he plans to discuss the new disqualification regime with other jurisdictions in 2009 to ensure banned directors from other countries cannot operate here either.

In addition, where disqualification of a director has occurred by automatic operation of the law in a person’s home jurisdiction, as opposed to a court, there will now be legal grounds for the Australian Securities and Investments Commission (ASIC) to apply to an Australian court for an order to disqualify that person in Australia.

ASIC will also be required to record the name of any person that has had a court order made against them under the proposed section on its disqualified persons register and ensure a copy of that court order is retained on the register.

The legislation also establishes that a corporation cannot indemnify a director for the legal costs of an unsuccessfully defended action brought by ASIC under the new law.